Trillions turn green

Investment dollars flow to climate change, clean tech

By

ThomasKostigen

SANTA MONICA, Calif. (MarketWatch) -- Institutional investors are committing billions of dollars to investments in climate change and are embarking on a bold new action plan to raise the profile of energy efficiency and clean technologies around the world.

Nearly 50 leading U.S. and European investors representing more than $8 trillion of assets met on Feb. 14 at the United Nations to lay out a timetable for their commitments to global climate change and to call on governments and other investors to act with their money as well.

"Our goal is to transform the world economy into one that is clean, green and sustainable," says California State Treasurer Bill Lockyer, who serves on the board of the leading pension funds, CalPERS and CalSTRS, collectively managing more than $500 billion in assets. "California's public pension funds have already committed over $800 million to this effort through investments in environmental technology. And they are actively pressing the corporate world to fully assess and disclose the risks and opportunities climate change presents for their business operations."

The group says its investment commitments will boost energy efficiency and clean technologies as well as require tougher scrutiny of carbon-intensive investments that may pose long-term financial risk. That means investments in industries that are heavy carbon emitters are under threat. By raising the specter of divestments due to risk these investors are firing a warning shot.

Risk is the ultimate red alert in investing circles because the more there is of it, the more people head for the hills. Pulling money out of the coffers of, say, the automotive industry will get auto companies to pay more attention to practices that will mitigate their carbon footprints. And this is the overall point of the investors who support the climate-action plan proposed at the summit: "Wake up polluters, you're in danger of losing shareholder support."

"With today's action plan, investors are advancing the need for closer scrutiny of investments to include the financial risks of climate change, while also harnessing emerging opportunities," says Florida Chief Financial Officer Alex Sink. "Florida is on board as the first state treasury in the nation to require fund managers to disclose how they incorporate climate risk into prudent investment management."

Putting a dent in global warming

Balancing divestment with reinvestments in alternative energy is a great plan of attack to reduce the amount of carbon pollution by industry while at the same time supporting solutions with tangible measures.

"This action plan reflects the many investment opportunities that exist today to put a dent in global warming pollution, build profits and benefit the global economy," says Mindy S. Lubber, president of the Ceres investor coalition and director of the Investor Network on Climate Risk, and one of the sponsors of the summit.

The 49 signatories of the plan will:

Support clean technology, with a goal of deploying $10 billion collectively over the next two years

Aim for a 20% reduction in energy used in core real estate investment holdings over a three-year period, and consider green building standards in making investment decisions

Require and validate that investment managers, investment consultants and advisers report on how they are assessing climate risks in their portfolios, whether from new carbon-reducing regulations, physical impacts or competitive risks

Encourage Wall Street analysts, rating agencies and investment banks to analyze and report on the potential impacts of foreseeable long-term carbon costs, in the range of $20 to $40 per metric ton of CO2, particularly on carbon-intensive investments such as new coal-fired power plants, oil shale, tar sands and coal-to-liquid projects

Push the SEC to issue guidance leading to full corporate disclosure of climate risks and opportunities

Push Congress for a mandatory policy to reduce national greenhouse gas emissions in accordance with the 60% to 90% reductions below 1990 levels by 2050 that scientists suggest is urgently needed to avoid the worst and most costly impacts from climate change

I can't support efforts like this enough. This is the market and its most savvy players coming together to solve the biggest long-term threat against the world.

And here's the icing on the cake:

A McKinsey Global Institute report presented at the summit says that major investments over the next decade in energy productivity -- the level of output achieved from the energy consumed -- could earn double-digit rates of return for investors.

How 'bout them apples? Reason enough to go green with your investments.

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